Already a member?

FlexShares, the ETF brand from Chicago-based Northern Trust, has
already made waves in its short time on the market. The new ETF
provider has just over a dozen funds in its offering, and it has
already seen a solid level of interest in a few of its choices,
including close to $2 billion in both
iBoxx 3-Year Target Duration TIPS Index Fund (
TDTT
)
and the
Morningstar Global Upstream Natural Resources Index ETF (
GUNR
)
.

Thanks to this success, FlexShares hasn't been shy about putting
out new products on to the market. The company is now continuing
this trend with a fresh focus on international markets to beef up
its product lineup (see
FlexShares Releases 3 New Dividend ETFs
).

The latest few funds have been targeting foreign dividend markets
including products focused on quality, defensive names, and a
'dynamic' international product as well. In continuing with this
theme, FlexShares has now put out another new ETF, this time
targeting foreign infrastructure companies with its
STOXX Global Broad Infrastructure Index Fund
(NFRA)
.

This new ETF looks to charge investors 47 basis points a year in
fees and will provide investors with diversified exposure to global
companies that have infrastructure ownership. While there is a bit
of competition in this space, this may be a potentially better way
to play the sector and we have highlighted some of the key points
regarding this new FlexShares fund below:

NFRA in Focus

This ETF follows the STOXX Global Broad Infrastructure index,
holding companies that are in any of the following business lines;
traditional utilities, energy, transportation, communications, and
government outsourcing/social infrastructure. In total, the ETF
holds roughly 150 names in its basket with a heavy focus on large
cap firms (read
Active Large Cap ETFs: Best of Both Worlds?
).

In terms of sectors, energy, communication, and transportation all
take up a good chunk of assets and combine to make up nearly 85% of
the portfolio. The U.S. leads from a national look at nearly 40% of
the total, while Japan, the UK, and Canada all receive double digit
allocations as well. Top individual holdings include
AT&T (
T
)
,
Vodafone (
VOD
)
, and
Union Pacific (
UNP
)
although all of them account for less than 4.25% each.

How does this fit in a portfolio?

FlexShares believes that this segment is a solid pick for investors
seeking a defensive play that has a low correlation to other
sectors of the global economy. The sector can also be a good yield
play, as many securities in the infrastructure space pay out robust
yields.

The product may not be appropriate for those who are looking for
high growth plays as infrastructure is generally a slow-growth
business, and most of the names in NFRA are large caps anyway.
Additionally, the fund does have some concentration risks in terms
of sectors, while the portfolio doesn't have a large component in
emerging markets (at least directly), so investors may miss out on
some of the gains there (see
Emerging Market ETFs: How to Pick Winners
).

Competition and Bottom Line

There are a few competitors in the infrastructure market, any of
which could be foes for NFRA. Some of the most popular include the
iShares S&P Global Infrastructure Index Fund (
IGF
)
, the
iShares S&P Emerging Markets Infrastructure Index Fund
(
EMIF
)
, and the
PowerShares Emerging Markets Infrastructure Portfolio (
PXR
)
.

Obviously, PXR and EMIF are going to be a lot more focused on
emerging markets, and thus might not be appropriate competitors for
the newly launched FlexShares fund. So the real competition will
probably come from IGF and the relatively small
SPDR FTSE/Macquarie Global Infrastructure 100 ETF (
GII
)
.

Both GII and IGF have a focus on developed markets and put their
biggest weight into the U.S., just like NFRA. The yields for both
are roughly around the 3.7% mark in 30-Day SEC terms, so they can
be considered income destinations as well (See
all the Utilities/Infrastructure ETFs here
).

Given the similar focus of these ETFs, and the fact that the leader
has less than $600 million in assets, and it could be difficult for
NFRA to build up assets. However, if it is able to show some
outperformance-or beat out the others on yield-it could definitely
find a niche in this competitive corner of the market.

Please note that once you make your selection, it will apply to all future visits to NASDAQ.com.
If, at any time, you are interested in reverting to our default settings, please select Default Setting above.

If you have any questions or encounter any issues in changing your default settings, please email isfeedback@nasdaq.com.

Please confirm your selection:

You have selected to change your default setting for the Quote Search. This will now be your default target page;
unless you change your configuration again, or you delete your
cookies. Are you sure you want to change your settings?